Thursday, June 20, 2019

Aluminum – Uses, Prices, and Production


This blog highlights information and data I have found on the Internet related to aluminum uses, prices, and production.   Price and production amounts represent global data.

Uses.  Several aluminum qualities, which make it an abundantly used structural metal, include light-weightiness; strength; durability; ductility; and malleability.   In 2018, aluminum accounted for the second highest sales revenues of all metals used in structural applications, behind iron’s use in steel.  Aluminum also has good electrical and thermal conductivity, with high use due to these properties.  Aluminum is useful as an additive in such products as glass and paint and is frequently alloyed with other metals, such as copper, zinc, and magnesium.  Aluminum finds use as a combusting agent, a reflecting surface, and in sound absorption.

Most aluminum, which does not occur separately as an element in the earth’s crest, is electronically separated from aluminum oxide (also known as alumina) after the oxide is chemically separated from bauxite rock.  Both the bauxite and the aluminum oxide have financially meaningful uses separate from the aluminum metal derived from them.   Bauxite serves well as an abrasive; as an anti-skid agent; and as an additive, e.g., in cement.  Aluminum oxide serves well as an additive in ceramics and glass, increasing their strength; as an absorbent; and as an abrasive.

Prices.  Bauxite and aluminum oxide prices are relevant to the aluminum market price.  Average 2018 price for bauxite was in the $30 per metric ton (mt) range and for aluminum oxide, in the $550 per mt range.   The 2018 aluminum average price was in the $2,100 per mt range.  The 2018 price of aluminum oxide varied significantly due to problems at some major bauxite-to-aluminum oxide processing plants.  

Industry knowledge suggests for aluminum producers to be profitable, the ratio of aluminum oxide to aluminum price needs to be less than about 20%.  With the average 2018 aluminum oxide and aluminum price ratio at about 26% ($550 per mt aluminum oxide price divided by $2,100 per mt aluminum price), 2018 was a difficult year for aluminum producers with respect to profit.

Production.  Internet data suggests that in 2018 approximately 300 million mt of bauxite was produced.  If the average bauxite 2018 price was $30 per mt, this gives a 2018 bauxite production value of approximately $9 billion (300 million mt times $30 per mt).

Internet data also suggests that in 2018 approximately 130 million mt of aluminum oxide was produced.   Assuming the average aluminum oxide 2018 price was about $550 mt, this gives a 2018 aluminum oxide production value of approximately $71.5 billion (130 million mt times $550 per mt).

And internet data suggests that in 2018 approximately 62 million mt of aluminum was produced.  Assuming the average 2018 aluminum price was $2,100 per mt, this gives a 2018 aluminum production value of approximately $130.2 billion (62 million mt times $2,100 per mt).

Based on the above production data, bauxite quantity mined results in aluminum produced having approximately 21% of the weight of bauxite mined (62 million mt aluminum produced divided by 300 million mt bauxite mined).

Also, assuming the above production data is approximately correct, the 2018 production value that the aluminum element adds to the global economy in terms of sales revenues is around $210.7 billion ($9 billion for bauxite; $71.5 billion for aluminum oxide; and $130.2 billion for aluminum metal).


Tuesday, June 11, 2019

Comparisons Between European, United States, and Japanese Chemical Companies


This blog attempts to provide some general financial comparisons between representative European, United States, and Japanese chemical companies.   Tables 1, 2, and 3, below, show 2018 financial data for four representative chemical companies from each area.


table 1   Europe              performance measure
basf
clariant
dsm
evonik
average
earnings per share
6.04
1.2
7.19
2.36
4.2
price to earnings ratio
11.78
18.09
11.71
12.1
13.4
% dividend yield
5.3
2.95
3.22
4.75
4.1
price/share divided by operating cash flow/share
7.09
11.7
11.13
6.6
9.1
return on equity %
13.04
12
13.81
11.9
12.7
one-year sales growth %
2.37
3.86
7.36
4.5
4.5
gross profit margin %
29.29
29.2
36.74
30.8
31.5
operating profit margin %
9.63
8.24
13.43
9.1
10.1
net income profit margin %
7.5
5.28
11.64
6.2
7.7
non-current liabilities divided by equity %
75.1
92.02
41.65
116.3
81.3
sales per employee
603,814
436,321
522,199
462,099
506,108
table 2  United States               performance measure
eastman
huntsman
kraton
westlake
average
earnings per share
7.56
2.54
2.1
7.66
5.0
price to earnings ratio
9.55
8.29
12.15
8.29
9.6
% dividend yield
3.19
3.09
0
1.45
1.9
price/share divided by operating cash flow/share
10.25
4.47
4.46
5.83
6.3
return on equity %
18.61
23.64
8.77
16.39
16.9
one-year sales growth %
6.3
12.35
2.65
7.39
7.2
gross profit margin %
24.24
21.7
28.83
23.01
24.4
operating profit margin %
15.29
11.07
12.48
16.31
13.8
net income profit margin %
10.64
6.63
3.33
11.53
8.0
non-current liabilities divided by equity %
142
131
241
71.48
146.4
sales per employee
700,069
940,000
1,050,000
973,500
915,892
table 3  Japan            performance measure
jsr
mitsui
teijin
tosoh
average
earnings per share
1.41
3.37
2.24
2.48
2.4
price to earnings ratio
10.99
9.2
7.28
5.24
8.2
% dividend yield
3.03
1.64
3.33
3.16
2.8
price/share divided by operating cash flow/share
8.56
8.47
4.28
3.88
6.3
return on equity %
8.8
16.29
12.44
19.34
14.2
one-year sales growth %
8.62
9.59
12.64
10.74
10.4
gross profit margin %
30.84
23.29
33.25
29.3
29.2
operating profit margin %
10.33
7.8
8.36
15.87
10.6
net income profit margin %
8.29
5.95
5.64
11.09
7.7
non-current liabilities divided by equity %
19.94
85.4
79.66
14.88
50.0
sales per employee
530,073
723,792
378,733
591,507
556,026


Data are provided for eleven financial performance indicators.  These eleven indicators are commonly used to evaluate a company’s financial performance.  For the monetary data in the tables (earnings per share and sales per employee), the currency is the US dollar.  The data were obtained from each company’s 2018 annual report.  For non-current liabilities, total non-current liabilities (not just financial but also pension and other non-current liabilities) are used.

Table 4, below, shows the averages of the four companies in each area (averages taken for tables 1, 2, and 3).


table 4             comparison
europe
usa
japan
standout
earnings per share
4.2
5
2.4
none
price to earnings ratio
13.4
9.6
8.2
europe
% dividend yield
4.1
1.9
2.8
europe
price/share divided by operating cash flow/share
9.1
6.3
6.3
none
return on equity %
12.7
16.9
14.2
none
one-year sales growth %
4.5
7.2
10.4
japan
gross profit margin %
31.5
24.4
29.2
none
operating profit margin %
10.1
13.8
10.6
none
net income profit margin %
7.7
8
7.7
none
non-current liabilities divided by equity %
81.3
146.4
50
usa
sales per employee
506,108
915,892
556,026
usa


Table 4 shows that for some of the financial performance indicators, one area has an average for its four companies that stands out (for example, a significant percentage difference exists from the averages of the other two areas).

Here are some comments based on the data in Table 4:

·         The European chemical companies, on average, are priced higher per share but also provide a significantly better dividend return;
·         Companies in all three areas have good cash flow (based on reasonably low price per share to operating cash flow per share ratio);
·         Returns on equity are reasonably good for the companies in three areas;
·         Japan’s one-year sales growth from 2017 to 2018 stands out;
·         Gross profit, operating income, and net income margin percentages are comparable for the three areas;
·         The USA chemical companies’ total non-current liabilities exceed their total equity, perhaps a worrisome sign; and
·         On the other hand, the sales per employee is significantly higher for the USA companies, usually a good sign.